Last Friday morning, on Israel's popular morning radio station, Reshet Bet, broadcaster Aryeh Golan interviewed Deputy Foreign Minister Zeev Elkin about the latest demands by the European Union that its research and development grants not be applied to territories beyond the 1967 lines.

Since mid-July, there have been reports of new EU guidelines that are expected to go into effect on Jan. 1, 2014, and are to apply to grants, prizes, and other financial instruments to Israeli bodies. Reflecting some of the growing rage in Israel at the latest EU initiative, Golan asked Elkin whether Israel could find alternative economic partnerships in India and China. Apparently, the idea of turning away from Europe to new Asian partners was raised in certain governmental circles as well.

True, this was not a proposal for a European boycott of Israel, though the headlines in the Israeli press gave readers that impression. Part of the concern in Israel is where this new policy will lead. For example, the EU guidelines could become the basis for formulating a territorial clause in future Israeli-EU agreements which would be used to force Israel to accept that any territories beyond the pre-1967 line are not part of Israel, including east Jerusalem and the Old City.

The EU went ahead and issued this new policy just as Israel was making tough concessions, including the release of convicted Palestinian prisoners, to set the stage for new peace talks. Both the substance and the timing of what the Europeans were doing drew bitter criticism across much of the Israeli political spectrum, and the move is likely to have a long-term impact on Israeli-European relations.

For specialists in European trade policy, the new trend in Israeli-European relations is particularly outrageous because it is built on the establishment of a clear double standard. Take EU policy on Morocco. In 2005, the EU and Morocco signed an international agreement allowing European fishermen to operate in Moroccan waters. Did the agreement apply to the territorial waters of Western Sahara, which was claimed by Morocco, but not recognized as Moroccan territory by the international community, including the states of the EU? In 1975, the International Court of Justice in The Hague determined that Morocco did not have sovereignty over Western Sahara.

Yet, in the EU-Moroccan fishing agreement, there is a provision allowing European fishermen to operate in the waters of Western Sahara. Fishing is a lucrative business. Morocco stands to gain at least 40 million euros in annual fishing fees. All funds derived from European fishermen have been going to Morocco.

Hans Correll, the former legal adviser to the U.N., attacked EU officials for allowing such an agreement. What makes the Moroccan case glaring is the fact that the latest EU guidelines on Israel explicitly state that "their aim is to ensure respect of EU positions and commitments in conformity with international law on the non-recognition by the EU of Israel's sovereignty over the territories occupied by Israel since June 1967."

But in the case of Morocco, the EU is not applying this standard, but is going ahead with an agreement, regardless of how it views the question of sovereignty in Western Sahara. And while the EU strenuously objects to supporting any Israeli presence in the West Bank, because of its legal status, it nonetheless allows European citizens to purchase beachfront vacation homes in the territory of Northern Cyprus that was occupied by Turkey in 1974. No punitive measures have been contemplated against Turkey, because of the ongoing conflict over the future status of this disputed territory. Europe supports a resolution of the Cyprus problem, without using the same economic levers of power it is employing in the Israeli case.

An analysis of the European Union's negotiations with India over a Free Trade Agreement also shows that there is no demand to say that it will only apply to territories in which India's sovereignty is not disputed. The EU has encouraged India and Pakistan to resolve their dispute over Kashmir. A study by a Pakistani legal scholar of the EU-Indian trade negotiations points out that previously concluded free trade agreements with other countries "do not impose binding conditions in respect of particular geopolitical disputes". True, the EU has employed economic sanctions against rogue states like Iran and North Korea. But it does not use economic leverage against friendly countries engaged in territorial disputes.

Looking at how the EU treats other territorial disputes, Israel has good reasons to be enraged with EU policy. Nevertheless, it will have to use its creative energies to bridge the gap with Europe and put its relations on a stronger footing.

Israel does have something to work with. A German adviser to Chancellor Angela Merkel told The Jerusalem Post last month that European cooperation with Israel in research and development in the EU's Horizon 2020 program is a European interest and not just an Israeli interest.

The background to the EU's program with Israel is the need for Europe to improve its global competitiveness and increase jobs and economic growth on the continent after years of sluggish growth. The Horizon 2020 program is not a European handout to Israel, but a joint initiative by which Israel puts up funds by itself and receives 1.6 euros for joint research and development for every euro it puts in.

Because of its scientific prowess, Israel is the only non-European country to have been invited to take part in this program. The Europeans knew what they were doing by inviting Israel, which is no longer viewed as a country known only for its Jaffa oranges, as it was in the 1950s. Clearly, both sides benefit from this cooperation and both have much to lose by its politicization by EU bureaucrats in Brussels.

So what were the Europeans thinking when they got Israel involved in the first place? Economists have long recognized that knowledge-based industries are the fastest-growing portion of the global economy, and serve as engines for economic growth. These are precisely the technological fields in which Israel leads and which Europe needs.

In their book "Start-Up Nation," Dan Senor and Saul Singer quote an American high-tech executive who admits that for companies like Google, Microsoft, and Intel, "the best-kept secret is that we all live and die by the work of our Israeli teams."

Why should Europe jeopardize its cooperation with Israel, which has served as such an important partner for the U.S. companies? To go down the path of limiting its scientific cooperation with Israel seems to be, ultimately, a self-defeating policy for Europe itself.

Then there is the issue of Israel's offshore gas fields. Europe presently imports most of its gas from Russia and from North Africa. David Wurmser used to serve as a Middle East expert for the U.S. vice president's office and later advised Noble Energy, which is involved in Israeli gas exploration. He points out in a paper for the Jerusalem Center for Public Affairs that there are today five existing or planned pipelines connecting Europe with the gas of North Africa. Four of the pipelines come through Algeria, which is facing growing threats from al-Qaida affiliates. Elsewhere in the Middle East, as in Sinai, they have shown their readiness to sabotage such pipelines. Having another source of gas from Israel could be critical for Europe if some of its current energy sources do not come available.

Wurmser concludes that Israel make Asia its preferred export destination and not Europe. This is a decision Israel will have to make as it influences how it builds its energy infrastructure. If Europe begins to present itself as an unreliable trading partner, then there will be many more Israeli voices who adopt the idea of making Asia into Israel's preferred market for its gas exports.

Israel and the EU need to get past this problematic period in their relationship. A great deal is at stake for both sides. It should not be overlooked that a revival of bilateral ties between Europe and Israel will require rebuilding the good will that has existed between both parties in the past, but has been damaged by the recent tensions between them.